Multiple Choice
Which of the following correctly describes how a decrease in the price level affects consumption spending?
A) A decrease in the price level raises real wealth, which causes consumption to increase.
B) A decrease in the price level decreases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase.
C) A decrease in the price level increases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase.
D) A decrease in the price level lowers real wealth, which causes consumption to decrease.
Correct Answer:
Verified
Correct Answer:
Verified
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